Countercyclical unemployment benefit extensions in the United States act as a propagation mechanism, contributing to … both the high persistence of unemployment and its weak correlation with productivity. We show this by modifying an … otherwise standard frictional model of the labor market to incorporate a stochastic and state-dependent process for unemployment …

This paper estimates the causal effect of long-term unemployment on wages. Job search theory implies that if … Unemployment Insurance (UI) extensions do not affect wages conditional on the month of unemployment exit, then reservation wages do … not bind on average. Then, UI extensions affect mean wages only through unemployment durations and are valid instrumental …

induced by unemployment insurance. The model features a detailed specification of the tax and transfer system, including … unemployment insurance benefits which depend on an individual's employment and earnings history. The model also captures the … for unemployment insurance benefits which varied by age and experience. The results show that a policy cut in the …

We investigate the optimal response of unemployment insurance to economic shocks, both with and without commitment. The … transitory increase in UI is optimal; and that a policy rule contingent on the change in unemployment, rather than its level, is …

A large literature has documented that the unemployment duration of unemployed individuals increases with the … generosity of the unemployment insurance (UI) system, which has been interpreted as the disincentive effect of UI benefits …